Analysis of market weights under volatility-stabilized market models (Q549872)

The authors consider the volatility-stabilized market model (VSM) with vector parameters. It is introduced as the unique-in-law non-negative solution of of a specific stochastic differential equation. This solution is closely connected to a collection of independent Bessel-square processes of possibly different dimensions from the unit simplex. The exit density of this collection is computed, and the joint density of the market weights at special stopping times is given. It is mentioned that the distribution of market weights under the VSM model corresponds to the multi-allele Wright-Fisher diffusion model studied in population genetics. The analysis is slightly generalized to include the Fleming-Viot models, which shows the behavior of the market weights for high dimensions.